Obama administration called for offshore corporate tax loophole

The Obama administration called for the same provision tucked in a Senate spending bill that seeks to limit a ban on federal contracts for corporations that move their headquarters abroad in order to avoid taxes.

The proposed limit on the contracts ban for so-called "inverted companies" is part of the financial services and general government appropriations bill that the Senate is considering. The limit has come under fire from the nonprofit advocacy organization, the U.S. Public Interest Research Groups (U.S. PIRG), which worries that the move would hurt taxpayers.

The Senate bill includes a clause stating that the ban "shall not apply to the extent that it is inconsistent with United States obligations under an international agreement." The White House's 2010 budget proposal calls for the exact same clause.

The White House Office of Management and Budget didn't provide a response to questions about the new language.

The prohibition was first instituted in the 2002 Homeland Security Act. It initially applied only to contracts involving the Department of Homeland Security, but it was extended to other federal agencies in the 2009 omnibus appropriations act. The $787 billion stimulus includes a similar clause limiting "Buy American" provisions aimed at promoting stimulus projects for U.S. companies. The White House called on lawmakers to weaken the "Buy American" clauses after U.S. trade partners protested them.

Business groups, including the U.S. Chamber of Commerce, TechAmerica, Associated General Contractors of America and the Professional Services Council, had lobbied for the loosening of the ban on contracts for inverted companies.

The House version of the financial services and general government spending bill does not include the new limit. The House bill passed in February. The Senate bill has yet to receive a floor vote.

Sen. Susan Collins (Maine), the top Republican on the Senate Appropriations subcommittee that produced the spending bill with the new limit on the ban, told The Hill on Wednesday that she would support the stronger version of the ban proposed by the House.

Collins, Sen. Max Baucus (D-Mont.) and Sen. Charles Grassley (R-Iowa) had pushed for the ban in 2002, arguing that companies that shielding their tax revenue shouldn't be allowed to compete with U.S. firms that "play by the rules."